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Oil Markets
For All Nails #8: Oil Markets by Noel Maurer ---- :Jefferson City, Jefferson, U.S.M. :10 February 1971 The riots in Damascus, Baghdad, and Jerusalem didn't particularly worry Bob Contreras. Life was too good. He spent more money on his private airmobile every week than your average Mexican made in a year. Riots in some Godforsaken desert on the other side of the planet did not concern him. Insuring that the officials in Mexico City continued to pretend that his airmobile was for "business," not personal use, concerned him much more. The 1967 study commissioned by the German and Arabian governments, though, that did concern him: but positively. The study concluded that oil could be profitably extracted from the Arabian peninsula at an average cost of less than five marks a barrel. The only limit was investment. Oil prices may be four times the production cost, but Arabia's government could greatly increase its revenues by the simple expedient of increasing production. FN1 Since Contreras's company supplied petroleum machinery, that could only be good for him. The 1968 announcement by the German oil conglomerate that it planned to triple Arabian production within five years had him downright jubilant. He immediately got on the phone with his contacts at Meximbank, the state-owned export financier, and started lining up the money he'd need to get the export contracts. The immediate softness in the oil market, that bothered him a little. The downward pressure on the dólar, that bothered him more. But President Domínguez said "I will defend the dólar like a dog." More importantly, the papers quoted Secretary Mercator as saying, "A strong dólar is synonymous with a strong Mexico." And Confederation banks seemed as willing as ever to shovel money at the USM, which thankfully then re-lent those pounds cheaply to connected companies like Contreras's. Lower oil prices were good for the economy, everyone said, and were still well above Pemex's production costs. No reason to worry. Until 1970, when the price suddenly crashed like a stricken airmobile, as speculators realized that the German expansion plans were serious. The federal government's finances were blown wide open. Foreign lending dried up. Suddenly, the economy was about as liquid as the Arabian desert that Contreras had so confidently ignored over the years. In February 1971, with another presidential "election" approaching, President Domínguez announced that he was devaluing the dólar that he'd pledged to defend like a dog. By federal fiat, Mexico's money immediately plunged from five dólares per CNA pound to eight. In March, Mercator announced that the salaries of all workers earning less than $1,500 a year would be immediately doubled, while the statutory minimum wage would at least triple. At the same time, the government froze retail food prices. (No one in Mexico or abroad had to wonder why it was the Secretary of War making such announcement, while the President stood mute.) Raphael Domínguez himself was offered up as a sacrificial lamb. He didn't resign the presidency, but the Progressive Party's nomination for the 1971 election went to the heretofore obscure governor of Chiapas, Immanuel Moctezuma. Moctezuma's campaign was directed more against the lame-duck incumbent than the pathetic candidates offered up by the approved opposition parties. Moctezuma, of course, had only good things to say about Secretary Mercator. That reassured Robert Contreras in his office in Jefferson City. The measures Mercator announced, however, did not reassure Contreras. Nor did the cartoons of fat capitalists in silk top-hats that had begun to appear in the major newspapers. Nor, most seriously of all, did Pemex's slow-ay policy towards its suppliers. He began, quietly, to buy pounds. He also began, not so quietly, to think about how Mexico might escape this new predicament. ---- Forward to FAN #9: For All Time (Part 1). Forward to 17 February 1971: Southern Exposure. Forward to Contreras Family: Chamber of Manufacturers. Return to For All Nails. Category: Contreras family Category:USM politics